Are Exploitation and Discrimination Caused by Capitalistic Greed?

Are too many greedy business owners too obsessed with maxi­mizing profit? Relative to most white males, are other groups of workers typically underpaid, given their productivity? You may be surprised to learn that it is logically inconsistent to respond positively to both questions. To see why, let's begin by considering how profit seeking would affect situa­tions where wages were less than workers' marginal revenue products.

Suppose you inherited a small fortune you wanted to turn into a large fortune, and you were con­vinced that some people are exploited by being paid less than their labor is worth. One strategy might be to place a want ad in the newspaper declaring, "If you are worth $12 hourly but are only paid $6 hourly, come work for My Company. I will pay you $7 an hour". If you avoided hiring work­ers paid the values of their margin­al products, hiring instead only workers that you exploit to the tune of $5 hourly, your fortune should grow rapidly. But your suc­cess would incite mimicry, and you would soon see ads from competitors: "If My Company pays only $7 for $1 2 worth of your pro­ductivity, come to work for Our Enterprise. We'll pay you $8 per hour." But this would elicit even higher wage offers as competition to exploit profit opportunities grew. Ultimately, all the workers worth $12 an hour would be paid $12 an hour.

The conclusion that exploitation should be eliminated by aggressive competition by profit seekers seems to conflict with research findings that women and mem­bers of other disadvantaged groups make less than the pay of white males with comparable education and experience. Only two logical reconciliations are possible. Either (a) all workers are paid what they are worth, on aver­age, and wage gaps reflect differ­ences in productivity, not bigotry, or (b) competition for profits is too weak to eliminate wage differen­tials not justified by productivity.

Some people use this analysis to argue that profit seeking is vigor­ous, ensuring that people are uni­formly paid what their labor is worth and that wage gaps by gen­der, ethnicity, or race merely re­flect differences in the willingness and ability of people from different groups to accomplish various jobs. For example, women are asserted to have more career interruptions because of family obligations and to be less committed to their careers, while typical members of most minority groups are asserted to have inferior educations and erratic work experience that has diminished their productivity.

A powerful counterargument suggests, however, that many people who make hiring decisions have agendas other than profit alone and that this creates wage structures not based on perfor­mance alone. Many white male executives, for example, surround themselves with sycophants with shared interests (e.g., golf, the stock market, gourmet meals, or office politics). Some might try to defend their hiring practices with statements such as, "Surveys prove that productivity suffers because female supervisors make both men and women uncomfortable," or, "I hired my friend's son because I've known him since he was a baby and have confidence that he will do a great job." Nevertheless, even if conscious prejudice seldom gov­erns employment policies, the results of hiring based on friend­ship or shared interests instead of capacity to do the job denies equal access to good jobs with high pay. This counterargument concludes that use of criteria for hiring and promotions other than potential performance alone prevents real­ization of the productive potential of nonwhites and females.

An irony is that white males are probably not enriched by discrimi­natory practices, which cause eco­nomic inefficiency if jobs are filled by white males who are not the best applicants. Many potential gains available through specializa­tion according to comparative advantage are lost, and the total value of national output will be less than if performance alone gov­erned employment practices.

How can such inefficiencies and inequities be overcome? Ideally, people who make employment decisions for firms would become more profit oriented - not less! Focusing on productivity instead of group affinity would undoubtedly decrease wage differentials based on race, ethnicity, and gender.

Affirmative action plans are a controversial option. Preferential hiring of women and members of minority groups is intended to broaden access to jobs but, how­ever well intended, sometimes cre­ates it own set of inefficiencies and inequities. These plans too often degenerate into quotas that are filled, in part, by eroding reason­able qualifications for the job. This escalates a backlash from some white males passed over for employment or promotions. (3977 digits)

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